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2013 (5) TMI 607 - AT - Income TaxPenalty u/s 271(1)(c) - source of fresh capital introduced held to be unexplained/bogus - CIT(A) deleted part penalty - Held that - Admitted facts of the case are that the A.O. made addition of Rs.3,50,000/-. The assessee furnished necessary explanation but the I.T.A.T. has found reasonable explanation to the extent of Rs.1,75,000/-. I.T.A.T. sustained the addition on the basis of estimation. In the case of estimation, it cannot be said that the assessee has concealed particulars or furnished inaccurate particulars of income. Also, it cannot be said that the explanation furnished by the assessee was found false. Under these facts it is not a fit case for penalty under section 271(1)(c) - appeal filed by the assessee is allowed.
Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. Analysis: Issue 1: Levy of Penalty under Section 271(1)(c) The appeal was filed against the order passed by the ld. CIT(A) regarding the levy of a penalty of Rs.1,75,000 under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2004-05. The original addition made by the Assessing Officer (A.O.) included two items, out of which the ITAT sustained the addition of Rs.1,75,000. The A.O. levied the penalty on both additions on the grounds of inaccurate particulars of income. The CIT(A) directed the A.O. to restrict the penalty amount to Rs.1,75,000 based on various case laws and upheld the penalty in principle. However, the CIT(A) directed the A.O. to exclude the amounts deleted by the ITAT for quantifying the penalty. The ITAT observed that the explanation provided by the assessee for the additions was not plausible, but considering the circumstances, sustained the addition of Rs.1,75,000 on an estimation basis. Issue 2: Arguments and Rulings The Authorized Representative argued that penalty under section 271(1)(c) should not be levied as the addition confirmed by the ITAT was based on estimation and the expenses furnished were not found false by the A.O. Various case laws were cited in support of this contention. The Departmental Representative relied on the order of the CIT(A). The ITAT, after hearing both parties, found that the addition was sustained based on estimation and not due to concealment or furnishing inaccurate particulars of income. It was noted that the explanation provided by the assessee was not found false. Therefore, the ITAT concluded that it was not a suitable case for imposing a penalty under section 271(1)(c) of the Act. Consequently, the orders of the Revenue Authorities were set aside, and the penalty of Rs.1,75,000 was cancelled. Conclusion The ITAT allowed the appeal filed by the assessee, emphasizing that in cases where additions are made based on estimation and not due to concealment or furnishing inaccurate particulars of income, penalties under section 271(1)(c) may not be justified. The decision was based on the principle that penalties should be imposed only in cases of deliberate concealment or furnishing false information, which was not established in this instance. (Order pronounced in the open Court).
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